Timely determining the price reversal allows you to open a deal at the very beginning of the movement and get the maximum profit. There are different methods of analysis to solve this problem. And I already told you about them in one of the articles. But today I want to return to this topic and offer another way to identify the reversal of the currency pair price. It uses two technical analysis tools: a hammer candlestick and a moving average. Let me remind you what a hammer candle is. It is formed on a downward movement and is a bullish candle. The hammer has a long lower shadow and a small body. This candlestick itself signals a change in the direction of price movement from downward to upward. But any signal cannot have a 100% performance guarantee. Therefore, to improve the quality of its use of additional tools of tehanalysis. I suggest that you set a chart with a moving average of 200.
Market entry
For opening a profitable trade we arrive as followsSelect trading instruments on which charts
there’s a downward movement. Next, we track the appearance of the hammer candlestick. If in the presence of…
which is her shadow on the moving average, we can talk about the presence of a strong
signal for a BUY trade order.
It can be used at the opening of the next candle. Losses are limited by
of placing stop-loss at a level just below
the minimum hammer. You can use one of the following to close a transaction
options. I would recommend that you focus on a strong level of resistance.
To do this, we set the Take Profit slightly below this level. You can do that.
use a trailing stop or close an order based on the indications of any
additional indicator.And now let’s see an example:The downward price movement forms a candlestick “hammer”. However, its tail concerns the MA200. This confirms the high probability of a reversal and further price increase. Favorable time to buy.The inverted hammer and the moving average are used to find the optimal points to open SELL trades on a reversal after an uptrend.I also recommend that you keep an eye on the volumes. If the volume increase during the turn signal generation, the quality of the signal becomes even higher. You can safely open a deal in compliance with the requirements of management.The reversal detection method I told you about today works well on high-volatile currency pairs. It’s not often the right situation. But if you see it, take a chance to get a profit.Inga Fedorova07.08.2019